The Judgment of the Court was delivered by
Banerjee, J.:— The petitioner is a limited liability company, incorporated in France, and is engaged in the business of global transport by air. The company commenced its business in India in the year 1947.
2. In exercise of its, power under section 10 of the Industrial Disputes Act, the respondent State of West Bengal referred certain disputes between the petitioner company and its workmen to the First Industrial Tribunal for adjudication. The reference was made on May 4, 1959. Amongst the issues referred to the Tribunal, issue No. 5 was “Bonus for 1955-56, 1956-57”.
3. The form in which the claim for bonus was first raised by the workers' union, during a conciliation proceeding preceding the reference, is to be found in a letter from the workers' union to the Labour Commissioner, the material extract being as herein below set out:—
“Bonus: The Company has made enormous profits during the years 1955 and 1956 and continues the same way for 1956/57. Three months' wages should be given as a bonus to all staff.”
4. Later on, however, the claim as to bonus took the following form:—
“Three months' wages with full allowances should be paid as ‘Bonus’ to all workmen “for the years 1955/56 and 1956-57.”
5. The reference made by the State Government did not particularise the claim as to bonus but referred the claim to the Tribunal in the general form as stated above.
6. The stand taken by the petitioner company and the respondent workers' union in their respective written statements before the Tribunal is set out below.
7. The petitioner company stated in its written statement:—
“* * * Previously the Company had made ex gratia payment of one month's pay with dearness allowance to its staff which has now been reduced to the payment of one month's dearness allowance only.
8. The payments were never made as bonus to the staff nor were meant to be so but ex gratia payment made to the staff of the Company employed in India and other countries as well. The quantum of this payment is determined centrally by the top management of the Company. * * * * *
9. The claim for bonus made in para 2 of the statement of the Union has no basis in fact. In global companies like this company, it is not possible to ascertain the profit or loss on the basis of transaction of any one establishment which is just a link in a long chain along which the services of the Company operate and the Full Bench Formula referred to by the Union cannot be properly applied to one of the units. Moreover, the Company has suffered loss in its business in India and as such the claim for bonus made by the Union is untenable and is liable to be rejected. No bonus in the proper sense of the word was ever paid to the staff at any time and such ex gratia payments as have been made could not have become a condition of service. * * *”
10. The respondent union stated in its written statement:—
“The work load of the said company has increased and/or increasing gradually but the said company is understaffed. From 1947 to 1954 the said company paid one month's wages including D. A; as Bonus to its employees irrespective of profit and loss but from the year 1954 they suddenly discontinued such payment and now the employees are getting an amount equal to one month's D.A as Bonus, although it pays high dividends to their share-holders and is making large profits and/or there is much available surplus for payment of bonus to its employees after meeting the prior charges. * * *
11. The Bonus paid by the said company is also inadequate and insufficient and cannot be compared favourably with other comparable Airlines even though the said company is doing the same and/or if not more busines and earning more profits than other Airlines. This Union states that after meeting the prior charges as laid down by the Full Bench Formula of the Labour Appellate Tribunal which has been subsequently confirmed by the Sup reme Court of India there will be enough surplus of the said company to meet the demand for increase in the amount of Bonus of the employees. Furthermore, the Bonus has become a condition of service …………………..”
12. By its award, the Industrial Tribunal came to the following conclusion:—
“**It appears that on the computation of the word loss as per accounts of the Company, the proportionate loss for the working in India was rupees one lakh and odd in 1955 and rupees one lakh and forty-one thousand in the year 1956. It was, therefore, pressed by the learned representative for the company that the employees were not entitled to any bonus for either the year 1955 or 1956. I agree that no bonus is payable on the trading profits of the company for the year 1955 or 1956. The fact remains, however, that the company used to pay bonus to the extent of one month's basic wage plus dearness allowance since its inception in 1947 to 1954, and this payment has been reduced to only one month's dearness allowance with effect from 1955. This payment also has been admitted by the company in its written statement. There can be no doubt that this payment was made irrespective of profit or loss of the company. It was not shown by the company that these payments were made on the basis of profits for all the years 1947 to 1954. The written statement of the company, however, shows that its business in India since 1947 has never been profitable. The principles enunciated by the Hon'ble Labour Appellate Tribunal in the case of Mahaluxmi Cotton Mills Ltd., reported in 1952 L.A.C 370 at page 372, as confirmed by the Hon'ble Supreme Court in the case of Ispahani Ltd., reported in 1959 (II) L.L.J 4, are applicable to the present case. The principles enunciated by the Hon'ble Supreme Court in the case of Graham Trading, reported in 1959 (II) L.L.J 393, clearly show the conditions when a payment of money should be decided to be a customary or a traditional payment. Following this decision of the Hon'ble Court I find that in view of the fact that the bonus has been paid to the workmen of this company at the same rate since the year of the commencement of the business in 1947 till 1954, it should be considered that the payment has been for an unbroken series of years and for a sufficiently long period so as to justify the claim of the workmen that the payment should be taken as a customary bonus. It is, therefore, awarded that the company should pay this quantum of bonus, viz., one month's basic pay plus dearness allowance for each of the years 1955 and 1956 also, less any amount already paid.”
13. With the conclusions arrived at by the Tribunal on other issues, I am not concerned in this Rule because the propriety of the award is being disputed on the point of bonus only.
14. It was contended on behalf of the petitioner company that on the reference as made and on the facts as found, the Tribunal should not have made any award as to bonus on the basis of customary or traditional payment.
15. In elaboration to this argument it was further contended that where terms of service were governed by contract it was difficult to introduce customary payment of bonus between the employer and the employee, except where the bonus was connected with a festival. Since the Tribunal did not connect the paymesnt hitherto made by the petitioner company as bonus in connection with any festival, it should not have awarded bonus on the basis of customary or traditional payment. It was also contended that there was no reference made regarding payment of customary or traditional bonus. The issue as to bonus, arising out of the pleadings, was whether three months' pay was payable by the petitioner company as bonus out of profit and the Tribunal was wrong in awarding customary or traditional bonus, which was not in issue and which case the petitioner had no opportunity of meeting by evidence.
16. On the question as to how and when customary or traditional bonus becomes payable, there are several decisions by the Supreme Court, which I need consider at the outset, namely, Ispahani Ltd. v. Ispahani Employees' Union(1), Graham Trading Co. (India) Ltd. v. Their Workmen(2), B.N Elias and Co. Ltd. v. Employees Union(3), and New Maneck Chowk Spinning and Weaving Co. Ltd. v. Textile Labour Association(4).
17. In Ispahani's case (supra) the Supreme Court observed:—
“**Puja is a special festival in Bengal and it has become usual with many firms there to give bonus before puja to their workmen. This matter came up before the Appellate Tribunal in Mahalaxmi Cotton Mills Ltd., Calcutta v. Mahalaxmi Cotton Mills Workers' Union, 1952 Lab. A.C 370 (LATI). In that case puja bonus was claimed as a matter of right, payable by the employer at a special season of the year, namely, at the time of the annual Durga Puja. This right was not based on the general principle that labour and capital should share the surplus profits available after meeting prior charges. It was held in that case that this right rested on an agreement between the employer and the employees, and that the agreement might be either express or implied. Where the agreement was not express, circumstances might lead the tribunal to an inference of implied agreement. The following circumstances were laid down in that case as material for inferring an implied agreement:—
(1) The payment must be unbroken;
(2) It must be for a sufficiently long period; and (3) The circumstances in which payment was made should be such as to exclude that it was paid out of bounty.
18. The Appellate Tribunal further pointed out that it was not possible to lay down in terms what should be the length of period to justify the inference of implied agreement and that that would depend upon the circumstances of each case. It also pointed out that the fact of payment in a year of loss would be an important factor in excluding the hypothesis that the payment was out of bounty and in coming to the conclusion that it was as a matter of obligation based on implied agreement. As to the quantum of bonus it was laid down that even if payment was not at a uniform rate throughout the period, the implied agreement to pay something could be inferred and it would be for the tribunal to decide what was the reasonable amount to be paid as puja bonus. The tests laid down in that case have since been followed in a number of cases by the Industrial Tribunals and the Labour Appellate Tribunal. We do not think it necessary to refer to all those cases. It may now be taken as well settled that puja bonus in Bengal stands on a different footing from the profit bonus based on the Full Bench Formula evolved in Mill Owners' Association, Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay(5). The claim for puja bonus in Bengal is based on either of two grounds. It may either be a matter of implied agreement between employers and employees creating a term of employment for payment of puja bonus, or (secondly) even though no implied agreement can be inferred it may be payable as a customary bonus. In the present case we are concerned with the first category, namely, that based on an implied agreement creating a term of employment between the employer and the employees, and so we shall confine ourselves to that category. It was this kind of bonus which was considered by the Appellate Tribunal in Mahalaxmi Cotton Mill's case, 1952 Lab. A.C 370 (LATI). We are of opinion that the tests laid down in that case for inferring that there was an implied agreement for grant of such a bonus are correct and it is necessary that they should all be satisfied before bonus of this type can be granted.”
19. This decision was followed by the Supreme Court in Graham Trading Company's case (supra) where the Supreme Court observed:—
“**The question, however, whether the payment in this case was customary and traditional, still remains to be considered. In dealing with puja bonus based on an implied term of employment, it was pointed out by us in A.I.R 1959 S.C 1147, that a term may be implied, even though the payment may not have been at a uniform rate throughout and the Industrial Tribunal would be justified in deciding what should be the quantum of payment in a particular year taking into account the varying payments made in previous years. But when the question of customary and traditional bonus arises for adjudication the considerations may be somewhat different. In such a case, the tribunal will have to consider: (i) whether the payment has been over an unbroken series of years; (ii) whether it has been for a sufficiently long period, though the length of the period might depend on the circumstances of each case even so the period may normally have to be longer to justify an inference of traditional and customary puja bonus than may be the case with puja bonus based on an implied term of employment; (iii) the circumstances that the payment depended upon the earning of profits would have to be excluded and therefore it must be shown that payment was made in years of loss. In dealing with the question of custom, the fact that the payment was called ex gratia by the employer when it was made, would, however, make no difference in this regard because the proof of custom depends upon the effect of the relevant factors enumerated by us; and it would not be materially affected by unilateral declarations of one party when the said declarations are inconsistent with the course of conduct adopted by it; and (iv) the payment must have been at a uniform rate throughout to justify an inference that the payment at such and such rate had become customary and traditional in the particular concern. It will be seen that these tests are in substance more stringent than the tests applied for proof of puja bonus as an implied term of employment.”
20. The same view was again reiterated by the Supreme Court in B.N Elias and Company's case (supra) in which the Supreme Court observed:—
“**Shri N.C Chatterjee for the appellants has mainly pressed the claim for bonus on the ground that it is a customary bonus and relies on Graham Trading Co. (India) Ltd. v. Their Workmen(6). Before we deal with this aspect of the matter we may shortly dispose of the claim based on an implied agreement or condition of service. The evidence shows that though payment was made uninterruptedly from 1942 to 1952 three times a year to the clerical staff and four times a year to the subordinate staff, it was made clear every time the payment was made that it was an ex gratia payment. Further the receipts given by the employees a sample of which was produced show that the bonus was accepted as ex gratia bonus. As is pointed in Graham Trading Co., 1959 S.C 1151 (supra), it would not be possible to imply a term of service on the basis of an implied agreement when the payment was clearly made ex gratia and had even been accepted as such, as in this case. Therefore, the contention of the appellants that the bonus claimed by them has become an implied term of agreement or a condition of service must fail.”
“**Turning now to the case of customary bonus which has been pressed before us on the authority of Graham Trading Company, A.I.R 1959 S.C 1151 (supra) we may point out that that was a case of a customary and traditional bonus payable at puja which was a special festival of particular importance in Bengal. That case cannot be held to have laid down that there can be customary bonus as such unconnected with some festival. It is difficult to introduce a customary payment of bonus between employer and employee where terms of service are governed by contract, express or implied, except where the bonus may be connected with a festival whether puja in Bengal or some other equally important festival in any other part of the country. The principles laid down in that case for governing customary and traditional bonus connected with a festival cannot in our opinion be extended to what may be called a customary bonus unconnected with any festival. We are therefore of opinion that the appellants having failed to prove (except in one matter with which we shall deal presently) that there was an implied agreement or condition of service for payment of bonus, they cannot ask for payment of any bonus on the basis of any customary payment unconnected with any festival.”
“**This brings us to one of the payments to subordinate staff which was ‘one month's basic wages as bonus at Puja time’. It will be noticed that this payment to the subordinate staff at Puja time is in addition to the other payments which are common between the clerical and the sub ordinate staff. This payment of one month's basic wage as bonus at Puja appears to have continued uninterrupt ed from the time it started in 1942 or thereabout upto the time the dispute arose in 1954. The payment was in variably of one month's basic wage and it appears that it was paid even in a year of loss, vide Ex. E. We are therefore of opinion that the principles laid down in Graham Trading Company, A.I.R 1959 S.C 1151 (supra), apply to one month's Puja bonus payable to the subordinate staff and it should be held that this pay ment has become customary and tra ditional in the respondent's concerns when the dispute was raised for the first time in 1954. We have no doubt that if the judgment in Grah am Trading Company, A.I.R 1959 S.C 1151 (supra) was available to the tribunal it would have held that one month's basic wage as bonus at Puja time to subordinate staff had become customary and traditional in the res pondent's concerns…………….”
21. In the case of New Maneck Chowk Spinning and Weaving Co. Ltd. (supra), the question for consideration was profit-sharing bonus but nevertheless while specifying the four concepts of bonus, namely, (i) production bonus or incentive wage, (ii) bonus as an implied term of contract between the parties, (iii) customary bonus in connection with some festival and (iv) profit-sharing bonus, the Supreme Court found no reason to differ from the concept of bonus as an implied term of agreement or as customary or traditional bonus as laid down in Ispahani's case or Graham Trading Company's case (supra).
22. From the decisions above referred to the following propositions may be collected:—
(a) A festival bonus, like Puja bonus, is not a profit-sharing bonus, but is a matter of right with the workers, resting either in express or on implied agreement between the employer and the employee.
(b) So as to imply such an agreement the payment must be unbroken, spread over a sufficiently long period and the circumstances in which such payment was made should be such as to exclude that it was paid out of bounty. The fact that the payment was made also in a year of loss would be an important factor in excluding the hypothesis that the payment was out of bounty.
(c) Even though there may not be any express agreement and implied agreement may not be inferred, Puja or festival bonus may be payable as customary bonus.
(d) Even if Puja or festival bonus has not been paid at a uniform rate, the tribunal may decide what is the reasonable amount to be paid as such bonus.
(e) Although Puja or festival bonus may be payable as customary bonus, customary (or traditional) bonus is, however, distinguishable from Puja or festival bonus. The tests for customary bonus are, (i) payment for an unbroken series of years, (ii) spread over a sufficiently long period, (normally longer than the period that would justify an inference of Puja bonus payable as traditional or customary bonus), (iii) made irrespective of profit, so much so that it shall have to be shown that the payment was made even in years of loss and (iv) payment at a uniform rate throughout, justifying an inference that the payment at such and such rate had become customary and traditional in the particular concern. The fact that the payment, satisfying the above tests, were called ex gratia payments by the employer would make no difference and such payments would not be materially affected by unilateral declarations of one party when such declarations are inconsistent with the course of conduct adopted by it. The Supreme Court characterised the above tests as more stringent than the tests applied for proof of Puja bonus.
(f) Graham Trading Company's case (supra) cannot be said to have laid down that there can be customary bonus unconnected with any festival. It is difficult to introduce a customary payment of bonus between employer and employee where terms of service are governed by contract, express or implied, except where the bonus may be connected with a festival whether Puja in Bengal or some other equally important festival in any part of the country. The principle laid down in Graham Trading Company's case for governing customary and traditional bonus connected with a festival cannot be extended to what may be called customary bonus unconnected with any festival.
23. Keeping in view the above legal propositions, I turn now to examine the propriety of the award of customary bonus as done by the Tribunal. There is no dispute that the petitioner company used to pay to its workers one month's basic wage plus dearness allowance, every year, which payment is characterised by the workers' union to have been paid as bonus and by the petitioner company as ex gratia payment. Such payments were made during the years 1947 to 1954, but with effect from 1955, were reduced to one month's dearness allowance only. There is no dispute that the payment either at the original rate or at the reduced rate were made even in years of loss. Therefore, the several tests for customary bonus (connected with festivals) laid down in the case of Graham Company Ltd. (supra) and summarised in clause (e) above may be said to have been satisfied in respect of the payment made by the petitioner company either as bonus or as ex gratia payment during the years 1947 to 1954. The period of eight years, from 1947 to 1954, may not be very long but regard being had to the fact that such payments were being made since the inception of the business of the company year after year, the test of sufficiently long period may be said to have been satisfied in the circumstances of this case. Further the fact that the petitioner company likes to call this payment ‘ex gratia payment’ is not of any consequence because if the tests are satisfied, call it by whatever name, the payment would be in substance payment of customary bonus.
24. Even then I have to bear in mind that the payment is not, connected with, any festival. The workers' union claimed the bonus as profit-sharing bonus and at no period of time the colour of the claim was changed into festival bonus.
25. In the case of B.N Elias Co. Ltd. (supra) the Supreme Court emphasised upon the difficulty of introducing customary payment of bonus between employer and employee, where terms of service were not governed by contract, express or implied, except when the bonus was connected with a festival.
26. It appears that the service conditions of the workmen are governed by a set of service regulations which do not include any term as to payment of bonus. Therefore, unless the workers' union succeeds in establishing an implied agreement or condition of service for payment of bonus, it cannot ask for payment of any bonus on the basis of any customary payment unconnected with any festival. The question is, can such an agreement be implied in the present case? In the case of Graham Trading Company, (supra) certain tests were laid down for governing customary and traditional bonus connected with festivals, but in the case of B.N Elias Co. (supra) the Supreme Court clearly laid down that those principles must not be extended to what may be called customary bonus unconnected with any festival and in that view of the matter rejected the claim of the workmen for payment of bonus unconnected with any festival on the basis of customary payment.
27. In the instant case, the findings of the Industrial Tribunal might have been sufficient to establish an implied agreement to pay Puja bonus on customary basis, if such a claim had been made, but the findings are not sufficient to establish customary bonus unconnected with the festival. Following the distinction pointed out by the Supreme Court in the case of B.N Elias and Co. (supra) I have to hold that the workers' union could not establish a case for payment of customary bonus unconnected with, a festival.
28. I have now to examine the other contentions pressed on behalf of the petitioner that the reference not being on a point of dispute as to non-payment of customary bonus the Tribunal should not have gone into the question of payment of bonus as customary bonus. It is true that the reference was made in general terms as to the dispute regarding payment of bonus. This generality, however, need not be a matter of complaint of anybody. The adjudication by the Tribunal is not analogous to arbitration proceedings by an arbitrator where the arbitrator can give an award on a reference, only if the points of reference are clearly placed before them. The scope of adjudication by an Industrial Tribunal is much wider. It would involve no hardship if the reference is made in wide terms provided of course, the dispute is one of the kind described in section 2(k) of the Industrial Disputes Act. The rules framed under the Act provide for the Tribunal calling for statements of their respective cases from the parties to the dispute and the dispute thus gets crystallised before the Tribunal proceeds with the adjudication. Despite the generality of the terms of reference the particulari-sation that follows by way of pleadings obviates all prejudice that the generality of the terms of reference might have caused. This was the view which was taken by the Supreme Court in the State of Madras v. C.P Sarathy(7), and in course of bis judgment Patanjali Sastri, CJ., administered a warning against over-emphasising formal defects in an industrial adjudication in the following language:—
“In view of the increasing complexity of modern life and the interdependence of the various sections of a planned economy, it is obviously in the interest of the public that labour disputes should be peacefully and quickly settled within the framework of the Act rather than by resort to methods of direct action which are only too well calculated to disturb the public peace and order and diminish production in the cou ntry, and Courts should not be astuie to discover formal defects and technical flaws to overthrow the settlements”.
29. I have, therefore, to see whether the scope of the dispute was crystallised in the pleadings despite the generality of the terms of reference. I have already set out two extracts from the written statements by the workers' Union and in my reading of the same bonus was claimed on two alternative basis, namely, (i) irrespective of profit and (ii) by way of sharing the profit. The first one may be equated to a claim on customary basis, although I need say that the pleading on this point left much to be desired. For the reasons aforesaid I need not uphold the second branch of the grievance made on behalf of the petitioner.
30. In view of my finding that the workmen of the company did not become entitled to any bonus as customary bonus, on the case made by them, I quash that portion of the award which allowed bonus to the workmen on customary basis. Let a writ of certiorari accordingly issue. This Rule is made absolute to the extent indicated above without any order as to costs.
31. Let all Interim orders stand vacated. The petitioner will be at liberty to operate the account which it opened in the bank Comptor National d' Escompte de Paris under order of this court, dated July 19, 1960.